Last year, many observers were disappointed when the U.S. Supreme Court dismissed the appeal in First American Financial Corp. v. Edwards, the case that presented the issue of whether a plaintiff who brings a RESPA claim has Article III standing to recover statutory damages in the absence of any actual damages caused by the alleged RESPA violation.  The CFPB had filed an amicus brief in the Supreme Court supporting the plaintiff’s position.  Now the case is back in the Ninth Circuit and the CFPB has filed another amicus brief supporting the plaintiff. 

The underlying lawsuit was a class action complaint filed in 2007 by a consumer who alleged that two First American entities violated RESPA by paying unlawful kickbacks to title agencies in exchange for agreements from such agencies to refer all of their title insurance business to First American.  The complaint alleged that the referral arrangements were part of agreements pursuant to which First American purchased ownership interests in such agencies to give the kickbacks “the appearance of legitimacy.”  

The Ninth Circuit agreed to hear an interlocutory appeal of the district court’s refusal to certify a nationwide class.  In that appeal, the defendants also argued that the district court’s ruling that the plaintiff had Article III standing was incorrect.  In 2010, the Ninth Circuit affirmed the district court’s Article III ruling and while also affirming the district court’s class action ruling, remanded the case to allow the plaintiff to conduct nationwide discovery and renew her class certification motion.  The defendants then sought review by the Supreme Court of the Article III question and in June 2011, the Supreme Court granted certiorari.  In October 2011, the CFPB filed an amicus brief in the Supreme Court supporting the plaintiff’s position that proof of actual injury is not necessary to establish standing under Article III to sue for an alleged RESPA violation. 

After the Supreme Court’s dismissal of the defendants’ appeal in June 2012, the case returned to the district court on remand.  In December 2012, the district court again denied the plaintiff’s motion to certify a nationwide class, ruling that to prove a RESPA violation, the plaintiff had to show that the defendants overpaid for their interests in the title agencies.  According to the district court, such proof was necessary for the plaintiff to show that the defendants gave the title agencies a “thing of value” in exchange for the referrals as required by RESPA.  In addition, because the district court read RESPA’s definition of a “referral” to require action “that has the effect of affirmatively influencing the selection” of a settlement service provider, it found that evidence on an individualized basis would be needed to show who precisely influenced class members to choose First American as their title insurer. 

In its amicus brief filed in the Ninth Circuit on October 30, 2013, the CFPB argues that, when a referral agreement is entered into as part of a transaction involving the sale of ownership interests, a plaintiff can prove that the defendant paid for the referral without necessarily showing that the defendant overpaid for those ownership interests.  According to the CFPB, the safe harbor that permits “payments for goods or facilities actually furnished or services actually performed” only applies when good, services or facilities are “actually provided-typically in the context of particular real estate settlements.” The CFPB therefore takes the position that the safe harbor does not extend to every transfer of “things of value,” such as ownership interests in title agencies.  It contends that the sale and purchase of such ownership interests can be considered “things of value” paid in exchange for referrals without regard to whether the price paid for the interests was fair.  Thus, according to the CFPB, RESPA’s kickback prohibition is violated if the referral agreements between First American and the title agencies were a condition to First American’s purchase of ownership interests in the agencies. 

The CFPB also argues that when a plaintiff receives multiple referrals to the same settlement provider (such as from lenders, mortgage brokers and realtors in addition to the entity making unlawful referrals), the plaintiff is not required to prove that the unlawful referral was the one that influenced the plaintiff’s decision to select that provider.  According to the CFPB, the district court misread RESPA’s definition of “referral” to necessarily require proof of an affirmative influence.  The CFPB argues that when an explicit referral is made, it is a referral for purposes of RESPA regardless of the level of influence it has on a consumer in an individual situation.